New-age channels make ITC step up tailor-made offerings

ITC has executed joint business plans with major quick commerce and e-commerce platforms.

It also deployed tailored market and outlet-specific strategies to capitalise on the growth from these channels, as stated in the company’s annual report released Friday.

“The rapid growth of modern trade, e-commerce and quick-commerce channels, coupled with the emergence of several new players, has necessitated the deployment of tailored market and outlet-specific strategies to seize the emerging opportunities,” the company said.

Digitally enabled sales have seen rapid growth, and combined with modern trade, now represent 31% of ITC’s FMCG portfolio, up from 17% in FY 2019-20.

Overall, peer HUL sees 7-8% business generated from e-commerce.

The surge in internet usage, widespread adoption of digital payments, and faster deliveries continue to drive e-commerce sales, especially for premium products.

The ITC e-store was launched after the pandemic (specifically to cater to post-covid demand for essentials), and the company discontinued it, saying that they no longer need the e-store as it has fulfilled its purpose.

ITC’s collaborations with e-commerce and quick commerce platforms on all aspects of operations, such as category development, supply chain, consumer offerings, and customer acquisition, have enabled it to significantly scale up sales in these channels.

“This was augmented by the development of exclusive pack assortments, channel-specific business plans and ‘digital first’ brands. Joint business plans executed in coordination with these platforms, coupled with agile supply chain initiatives, have further fortified your company’s market standing in e-commerce and quick commerce channels,” it added.

The company noted that the rapid acceleration in new generation channels, coupled with diverse demographic profiles, is making FMCG distribution more complex.

“Proactive interventions continue to be made towards addressing emerging trends such as the rapid growth of new generation channels and increasing demand for premium products,” it said.

Shifting channels

ITC’s comments align with a broader trend of companies highlighting a shift in demand towards online sales channels. Meanwhile, organised trade is strengthening in urban India, with new pharmacies and specialised beauty stores emerging.

Last month, Hindustan Unilever Ltd (HUL) announced it is expanding sales channels to include more health and wellness stores, premium beauty outlets, and quick commerce, adapting to changing consumer shopping habits.

India’s fast-moving consumer goods market is largely unorganised, dominated by millions of small “mom-and-pop” stores. However, the market has visibly shifted. More affluent consumers prefer air-conditioned grocery stores, while those in large metros increasingly opt for same-day deliveries, impacting smaller retailers.

Companies are taking steps to mitigate adverse effects on offline retailers.

Last month,Dabur India reaffirmed its commitment to general trade partners with the All India Consumer Products Distributors Federation (AICPDF) amidst shifting consumption patterns and pressure from online sales.

Other companies are also increasing e-commerce-specific launches to differentiate across channels, as reported byMint.

While online sales account for less than 10% of business for most large companies, the share of quick-commerce is rapidly growing. According to Nielsen IQ data, e-commerce held a 13% value share in the top eight metros for the 12 months ending 31 March, driven by increased online shopper penetration, more purchase occasions, and larger basket sizes.

ITC’s products reach nearly seven million retail outlets, with over one-third serviced directly. Market coverage has more than doubled compared to pre-pandemic levels.

In the general trade channel, ITC demonstrated “resilient” performance through a focused market approach and differentiated product assortments, including measures to drive premiumization. In the March quarter, the company’s core FMCG segment (cigarettes and other FMCG products) contributed ₹14,732 crore, up from ₹13,996 crore a year ago.

“During the year, urban markets witnessed heightened competitive intensity from regional-local players and accelerated channel shift with the increasing salience of modern trade, e-commerce and quick commerce. Customised servicing based on outlet potential and retail engagement programmes has been deployed to stimulate demand for your company’s products with enhanced focus on premium grocery outlets,” the company said.

Indian economy

In FY 2024-25, ITC’s gross revenue and Ebitda stood at ₹73,464.55 crore and ₹24,024.83 crore, respectively. Profit after tax grew by 0.9% to ₹20,091.85 crore. The company operates across various businesses, including cigarettes, agri-products, paper and packaging, and fast-moving consumer goods.

Earlier this year, ITC acquired Sresta Natural Bioproducts (24 Mantra Organic Foods), increased its stake in Mother Sparsh Baby Care (Mother Sparsh), and acquired Ample Foods (Prasuma and Meatigo) in February.

Commenting on the broader economy, ITC said that the cumulative impact of increased capital expenditures in the second half of FY 2024-25 and front-loaded government capital expenditures in FY 2025-26, along with interest rate cuts and liquidity support from the Reserve Bank of India (RBI), would support growth.

“India’s macro-economic variables are expected to remain stable in the year ahead, with GDP growth for FY 2025-26 expected to be approximately 6.5%. Consumption expenditure is expected to pick up progressively, led by continued recovery in rural demand backed by a good monsoon, along with improvement in urban demand as inflation stabilises and tax cuts announced in the Union Budget boost disposable incomes,” it said.